Capital Gains Tax in India — Short Term vs Long Term for All Assets
By Parul Singh, GST Practitioner · Capital Gains · Updated June 2026
Table of Contents
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What is Capital Gains Tax?
From selling NSE stocks to selling a Dwarka flat, capital gains tax applies differently. I computed gains for 1,000+ clients. Capital gains tax is levied on the profit earned from selling a capital asset -- whether it is shares, property, mutual funds, gold, or any other investment.
Official Reference: Sections 45-55A of the Income Tax Act 1961 govern capital gains. Section 2(14) defines capital asset. Section 2(29A) defines short-term capital asset and Section 2(42A) defines long-term capital asset. Section 48 provides the computation mechanism.
Short Term vs Long Term Capital Gains
| Asset | Short Term (STCG) | Long Term (LTCG) |
|---|---|---|
| Equity shares (STT paid) | < 12 months | > 12 months |
| Equity mutual funds | < 12 months | > 12 months |
| Debt mutual funds | As per slab | As per slab (no indexation post 2023) |
| Immovable property | < 24 months | > 24 months |
| Gold / Jewellery | < 24 months | > 24 months |
Tax Rates on Capital Gains
| Asset Type | STCG Rate | LTCG Rate |
|---|---|---|
| Equity shares (STT paid) | 20% | 12.5% (above ₹1.25L exemption) |
| Equity MFs (STT paid) | 20% | 12.5% (above ₹1.25L exemption) |
| Immovable property | As per slab | 12.5% (no indexation) or 20% with indexation (pre-2024 assets) |
| Gold | As per slab | 12.5% without indexation |
| Debt mutual funds (post 2023) | As per slab | As per slab |
📍 Real Example -- Property Sale -- Dwarka Flat
Suresh bought a flat in Dwarka in 2018 for ₹60 lakh and sold it in 2025 for ₹1.2 crore.
Long-term capital gain (with indexation for pre-2024 assets):
• Indexed cost: ₹60L × (CII 2024-25/CII 2018-19) = ₹60L × (363/280) = ₹77.79L
• LTCG: ₹1.2Cr - ₹77.79L = ₹42.21L
• Tax @ 20% with indexation: ₹8.44 lakh
• Without indexation @ 12.5%: ₹1.2Cr - ₹60L = ₹60L × 12.5% = ₹7.5L
• He can choose the lower tax -- ₹7.5 lakh in this case
Long-term capital gain (with indexation for pre-2024 assets):
• Indexed cost: ₹60L × (CII 2024-25/CII 2018-19) = ₹60L × (363/280) = ₹77.79L
• LTCG: ₹1.2Cr - ₹77.79L = ₹42.21L
• Tax @ 20% with indexation: ₹8.44 lakh
• Without indexation @ 12.5%: ₹1.2Cr - ₹60L = ₹60L × 12.5% = ₹7.5L
• He can choose the lower tax -- ₹7.5 lakh in this case
Exemptions & Tax Saving on Capital Gains
- Section 54: LTCG on property → invest in new residential property (no limit)
- Section 54F: LTCG on any asset → invest in residential property (if you do not own more than one house)
- Section 54EC: LTCG → invest in NHAI/REC bonds within 6 months (max ₹50 lakh)
- Section 54B: LTCG on agricultural land → reinvest in agricultural land
- Section 10(38): LTCG on equity (STT paid) up to ₹1.25 lakh is exempt
📍 Real Example -- Section 54 -- Property to Property in Delhi
Priya sold a flat in Vasant Kunj for ₹2 crore (LTCG ₹80 lakh). She bought a new under-construction flat in Dwarka for ₹1.5 crore within 2 years. Under Section 54, the entire ₹80 lakh LTCG is exempt because the new property cost exceeds the capital gain. Tax saved: ₹16 lakh (at 20% rate).
⚠️ Common Mistake: Section 54EC bond investment must be made within 6 months of the sale. These bonds (NHAI, REC, PFC, IRFC) have a 5-year lock-in and currently offer 5-5.5% returns. The ₹50 lakh limit applies per financial year. If your LTCG exceeds ₹50 lakh, you can invest ₹50 lakh in FY of sale and ₹50 lakh in next FY if the sale date falls in the last quarter.
💡 Pro Tip from Parul: Capital gains tax planning is complex and one wrong move can cost lakhs. I provide expert capital gains computation and exemption planning -- ensuring you use every legal avenue. Consultation: ₹1,999. Call/WhatsApp: +91 95401 04776
Common Capital Gains Mistakes
- Not computing indexed cost -- paying tax on inflationary gains
- Missing Section 54EC deadline -- 6 months is strict
- Not reporting equity LTCG -- even ₹1 above ₹1.25L exemption must be reported
- Wrong holding period -- 12 months for shares vs 24 months for property
- Not claiming 54F exemption -- available even for non-property capital gains
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Frequently Asked Questions
Is LTCG on equity shares taxable?
Yes, LTCG on equity shares and equity mutual funds (where STT is paid) exceeding ₹1.25 lakh per year is taxable at 12.5% (as per Budget 2024). Gains up to ₹1.25 lakh are exempt under Section 112A.
Can I save tax on property sale completely?
Yes, under Section 54, if you invest the entire LTCG in a new residential property within 2 years (or 3 years for under-construction), the entire gain is exempt. There is no upper limit on the exemption amount.
What is the CII (Cost Inflation Index) for 2025-26?
The CBDT notifies CII every year. For 2024-25, it is 363. For 2025-26, it will be notified closer to the financial year. Use this index to compute indexed cost of acquisition for long-term capital gains on property and gold.
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